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DATE: March 31, 2016 (Date of pronouncement)
DATE: April 15, 2016 (Date of publication)
AY: 2009-10
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CITATION:
Transfer Pricing Of Corporate Guarantees: Explanation i(c) to S. 92 B, though stated to be clarificatory and stated to be effective from 01.04.2002, has to be necessarily treated as effective from at best AY 2013-14 as it is an "anti abuse" provision. Dept’s submission that Bharti Airtel 161 TTJ 428 is “per incuriam” is not acceptable. Law laid down in Micro Ink 176 TTJ 8 (Ahd) on transfer pricing implications of corporate guarantees reiterated

It is very important to bear in mind the fact that right now we are dealing with amendment of a transfer pricing related provision which is in the nature of a SAAR (specific anti abuse rule), and that every anti abuse legislation, whether SAAR (specific anti abuse rule) or GAAR (general anti abuse rule), is a legislation seeking the taxpayers to organize their affairs in a manner compliant with the norms set out in such anti abuse legislation. An anti-abuse legislation does not trigger the levy of taxes; it only tells you what behavior is acceptable or what is not acceptable. What triggers levy of taxes is non-compliance with the manner in which the anti-abuse regulations require the taxpayers to conduct their affairs. In that sense, all anti abuse legislations seek a certain degree of compliance with the norms set out therein. It is, therefore, only elementary that amendments in the anti-abuse legislations can only be prospective. It does not make sense that someone tells you today as to how you should have behaved yesterday, and then goes on to levy a tax because you did not behave in that manner yesterday. It is for this reason that the Explanation to Section 92 B, though stated to be clarificatory and stated to be effective from 1st April 2002, has to be necessarily treated as effective from at best the assessment year 2013-14

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DATE: April 6, 2016 (Date of pronouncement)
DATE: April 15, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Rule 46A of the Income Tax Rules which regulates the admission of additional evidence by the CIT(A) cannot override the principles of natural justice

The principle “Audi alteram partem”, i.e. no man should be condemned unheard is the basic canon principles of natural justice and accordingly we find merit in the contentions of the assessee that Rule 46A of the Income Tax Rules cannot be over ride the principles of natural justice. Hence we are of the view that the learned CIT(A) was not justified in refusing to admit the various additional evidences furnished by the assessee

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DATE: April 5, 2016 (Date of pronouncement)
DATE: April 15, 2016 (Date of publication)
AY: 2006-07
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CITATION:
S. 147: Though assessee claims that she is a non-resident & that onus is on the revenue to show that the money in the HSBC Geneva account is taxable in India, the non-cooperation with the Revenue by signing the consent waiver form shows that she has something to hide and makes it an unfit case for exercise of writ jurisdiction

In the normal course of human conduct if a person has nothing to hide and serious allegations /questions are being raised about the funds a person would make available the documents which would put to rest all questions which seem to arise in the mind of the Authorities. The conduct on the part of the Petitioner and her uncle, in not being forthcoming, to our mind leads us to the conclusion that this is not a fit case where we should exercise our extra ordinary writ jurisdiction and/or interfere with the orders passed by the authorities under the Act. If a person has nothing to hide, we believe the person would have cooperated in obtaining the Bank Statements

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DATE: March 24, 2016 (Date of pronouncement)
DATE: April 15, 2016 (Date of publication)
AY: 2011-12
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CITATION:
S. 143(3): In an AIR scrutiny assessment, the AO is not entitled to widen the scope of scrutiny without approval of the CIT as per CBDT's Instruction. Such an assessment order is not sustainable

In fact, what the AO did was to widen the scrutiny. Now, para 2 of CBDT Instruction is specific when it states that where it is felt that apart from the AIR information, there is potential escapement of income more than Rs. 10 lakhs, the case may be taken up for wider scrutiny with the approval of the administrative Commissioner. So, the proper course for the AO before making these additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction

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DATE: April 5, 2016 (Date of pronouncement)
DATE: April 15, 2016 (Date of publication)
AY: 2003-04
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CITATION:
S. 147/ 148: Law laid down in Jet Airways India 331 ITR 236 and Ranbaxy 336 ITR 136 that if AO does not make any addition for the reason stated for reopening, he cannot add any other income holds good even for years when Explanation 3 to s. 147 is operative

The argument of the Ld. DR that the ratio propounded in Jet Airways India vs. CIT 331 ITR 236 and Ranbaxy Laboratories Ltd. vs. CIT(2011) 336 ITR 136 does not apply since those cases related to assessment years when Explanation 3 to section 147 was not on the statute, we find has not merit since in the above mentioned decisions the Court has interpreted the provision of section 147 on first principle to hold that only if addition are made on account of income which the AO had reason to believe had escaped assessment that any other addition can be made. It is not Explanation 3 which had been interpreted in favour of the assessee in these cases. In fact we find that Explanation 3 empowers AO’s to make assessment on any matter which comes to their notice during assessment proceedings. But the same alongwith section 147 has been interpreted as stated above. Therefore, the presence or absence of Explanation 3 to section 147 does not nullify the interpretation given by the courts in the above stated judgments

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DATE: March 29, 2016 (Date of pronouncement)
DATE: March 31, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 9(1)(vii)/ 40(a)(ia)/ 194J: “Technical services” & “Managerial and Consultancy service” denotes services that cater to special & exclusive needs of the consumer/user. A "facility", even if termed as a service, which is available to all users, does not come within the ambit of “technical services” in Explanation 2 of s. 9(1)(vii)

“Technical services” like “Managerial and Consultancy service” would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the latter, even if termed as a service, is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service. It is only service of the above kind that, according to us, should come within the ambit of the expression “technical services” appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act

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DATE: March 18, 2016 (Date of pronouncement)
DATE: March 30, 2016 (Date of publication)
AY: 1997-98
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CITATION:
S. 37(1): Distinction between "application software" and "system software" explained. Expenditure on "application software" is revenue as it allows efficient carrying on of business and requires to be constantly updated due to rapid advancements in technology and increasing complexity of the features

The concept of enduring benefit must respond to the changing economic realities of the business. The expenses incurred by installation of software packages in the present computer world, which revolves on the modern communication technology, enables the assessee to carry on its business operations effectively, efficiently, smoothly and profitably. However, such software itself does not work on a standalone basis. It has to be fitted to a computer system to work. Such software enhances the efficiency of the operation. It is an aid in the manufacturing process rather than the tool itself. Therefore, the payment for such application software, though there is an enduring benefit, does not result in acquisition of any capital asset and it merely enhances the productivity or efficiency and hence, has to be treated as revenue expenditure

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DATE: February 9, 2016 (Date of pronouncement)
DATE: March 30, 2016 (Date of publication)
AY: 2011-12
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CITATION:
S. 115JA/115JB: Capital receipts (such as subsidy & carbon credits), which have no income element, have to be excluded from book profits even if credited to the P&L A/c

The genesis of Sec 115J, thereafter section 115JA and now section 115JB was to ensure that the assessee, while making profit from operations, should not enjoy tax free status due to various deductions available under the Income Tax Act. There was never any intention of the legislature to tax what is not income at all. In a recent decision, the Hon’ble Apex Court in the case of Indo Rama Synthetics (I) Ltd -vs- CIT (2011) 330 ITR 363 (SC) has held that the object of MAT provisions is to bring out the real profit of the companies. The thrust is to find out the real working results of the company. Inclusion of receipt in the computation of MAT would defeat two fundamental principles, it would levy tax on receipt which is not in the nature of income at all and secondly it would not result in arriving at real working results of the company. The real working result can be arrived at only after excluding this receipt which has been credited to P&L a/c and not otherwise

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DATE: March 9, 2016 (Date of pronouncement)
DATE: March 30, 2016 (Date of publication)
AY: 2009-10
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CITATION:
Bogus Purchases: Theory that transaction "defies human probabilities" cannot be applied to purchases in isolation but has to be applied to the entire transaction in the light of documentary evidence produced by the assessee

The tax authorities have not accepted the claim of purchases of diamonds from TTPL on the reasoning that the said transaction defies the human probabilities. The tax authorities have, accordingly, rejected the various evidences furnished by the assessee in support of claim of purchases. We also notice that the tax authorities have arrived at such a conclusion only by considering the purchase transaction and did not prefer to examine the claim of export of same goods in the succeeding year and re-import of the same goods thereafter. In our view, the surrounding circumstances and human probabilities attached to a transaction should be examined by considering the transactions as a whole. Examination of part of transactions alone in the context of human probabilities/surrounding circumstances, some times, would give misleading results

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DATE: March 17, 2016 (Date of pronouncement)
DATE: March 28, 2016 (Date of publication)
AY: 2012-13
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CITATION:
Strictures passed against high-handed and unfair approach of AO (IRS Officer) in refusing to give an acknowledgement of stay application. Chief CIT directed to ensure such behaviour is not repeated. Dept directed to nominate another AO to hear stay application

We find this conduct on the part of the Assessing Officer to accept a stay application and not immediately give acknowledgement of its receipt is unacceptable. The least that is expected of a civil servant is to be fair and civil. In the absence of the above, his conduct is not one becoming of an Officer belonging to the prestigious Indian Revenue Service. The least that is expected of an Officer is that when a person files an application / letter, which is accepted by him, an acknowledgement should be forthwith given to the party filing the application or letter. In case he refuses to accept the letter he should endorse on the letter / application the reason why it is not being accepted with a line or two for the refusal to accept. In case he does accept it and give an acknowledgment he can deal with the applications/ letters as is appropriate in accordance with law. We believe that what has happened in this case is an aberration. However, the Chief Commissioner of Income Tax would ensure that his Officers do not behave in such an high handed and unfair manner, not expected of civil servants

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